Question

Natalie invests $2,000 into a savings account

which earns 11% per year. In 20 years, how
much will Natalie's investment be worth if
interest is compounded monthly? Round to the
nearest dollar.

Answer 1

$17,870

Explanation:

You must use the formula for compound interest.

A = P(1 + r/n)^nt

I suggest you look it up at some point so that you can do these more easily in the future!

Answer 2

We can use the formula for compound interest to find the future value (FV) of Natalie's investment:

FV = P * (1 + r/n)^(n*t)

Where:

P is the principal amount (the initial investment), which is $2,000 in this case

r is the annual interest rate as a decimal, which is 11% or 0.11

n is the number of times the interest is compounded per year, which is 12 since interest is compounded monthly

t is the number of years, which is 20

Substituting the values into the formula, we get:

FV =

2

,

000

∗

(

1

+

0.11

/

12

)

(

12

∗

20

)

�

�

=

2,000 * (1.00917)^240

FV = $18,255.74

Therefore, after 20 years of compounded monthly interest at a rate of 11%, Natalie's investment of 2,000 will be worth approximately 18,256.